You can’t simply serve a U.S. subsidiary

My BusOrg professor, Big Tony (who readers know from an earlier post is a great teacher and a rabid Red Sox fan), was awfully good at teaching the concept of the corporate veil. It’s very simple, he said. You’ve gotta have a compelling reason to pierce it. The whole purpose of a corporation is to be a separate entity, a separate being from its owners, shielding the owners from liability if they didn’t have a part in wrongdoing. Part of the concept is a rule against serving Warren Buffett personally by dropping off a summons at Berkshire Hathaway’s HQ at 36th & Farnam. (That’s not the Buffett Rule, but I digress…)

Redneutro, via Wikimedia Commons.

This is especially true of corporate subsidiaries, and truer still of U.S. subs of foreign companies. Take Chrysler, for example. When you sue Chrysler over a defective Jeep, you’re pretty solid in just servng the Michigan outfit. But if you allege liability on the part of the parent company, Fiat Chrysler Automobiles, N.V. (which we’ll just call FCA here– and I don’t mean the Fellowship of Christian Athletes), serving in Michigan ain’t gonna cut the mustard. You have to go abroad to get FCA on the hook. You can’t just hit Chrysler and assume that FCA is in the case, too.

The corporate veil doesn’t get pierced just because it hangs overseas.

In the seminal case on the rules for serving defendants abroad, Justice O’Connor was pretty clear with the idea that, unless a statute in your jurisdiction allows you to serve a parent company* by delivery to its subsidiary in that jurisdiction, don’t do it in the U.S. The Nine Wise Souls– all of them– held in Volkswagenwerk Aktiengesellschaft v. Schlunk that VW could be served via Volkswagen of America, Inc. only because the U.S. subsidiary was headquartered in Illinois, and Illinois had a specific statute allowing such service. In the intervening three decades, VW of America has moved to the Virginia suburbs of DC, just outside the Beltway, and no other state has adopted such a statute. Today, even if you sue Volkswagen’s German parent (also the owner of Audi, Bugatti, Ducati, Porsche, Lamborghini…) in Illinois, you have to serve it in scenic Wolfsburg, Lower Saxony… Germany.

Which means, unquestionably, do it within the confines of the Hague Service Convention— the more well known holding of Schlunk. The corporate veil doesn’t get pierced just because it hangs overseas.

* The idea doesn’t just apply to carmakers. They’re just the first to come to mind.

About Us

Aaron Lukken and Viking Advocates partner with a network of attorneys and agents around the world. Aaron has a wealth of experience assisting attorneys across North America in navigating the choppy waters of cross-border litigation.

Aaron became intrigued by international issues as an Army brat in the late 1970s, when his father was stationed at NATO Headquarters (SHAPE) in Belgium. His family’s three years abroad sparked a fascination with foreign cultures, languages, and politics, and eventually… international law.